If you want text book example of how confused the Turnbott Government and the property lobby are about negative gearing, look no further than the below examples.
In parliament yesterday, Prime Minister Malcolm Turnbott once again extorted that Labor’s proposed changes to negative gearing and the capital gains tax discount would “crash housing prices”:
More than one-third of new loans were made to housing investors and it “beggars belief” that taking those buyers out of the market would not impact on housing values.
“To crash housing prices would be very damaging to the economy,” he said.
“(The ALP’s policy) would represent a very significant shock to the largest single-asset class in Australia.”
Which followed his comments over the weekend:
The Labor Party’s negative gearing policy and its wind back on the capital gains discount, or its increase in tax on capital gains, is a very dangerous one. It has been very, very poorly thought out. The consequence of it will be a decline in property prices.
Every homeowner in Australia has a lot to fear from Bill Shorten.
…what Bill Shorten has done, he has set out to smash the residential housing market… That will lower the price of property… Bill Shorten is going to gnaw away at that equity. His policies will make your home worth less…
Bill Shorten’s policy is calculated to reduce the value of your home.
As well as deputy leader, Barnaby Joyce’s, comments over the weekend:
Mr Joyce said… Labor’s policy to restrict negative gearing to new properties will make houses more affordable… What they [Labor] say is correct, houses are going to be more affordable, but naturally enough, people who own those houses are going to be losing equity.”
So according to the Turnbott Government, changing negative gearing would destroy the housing market, crashing house prices, and leaving every Australian home owner worse-off.
The problem for Turnbott is that the property lobby’s own modelling does not back him up. As noted by The Guardian’s Lenore Taylor today, they have argued that removing negative gearing would actually raise property values [my emphasis]:
Curiously, actual modelling conducted by the Housing Industry Association suggests that limiting negative gearing could actually cause house prices to go up…
Housing would become “more expensive”, the modelling report, by Independent Economics, said.
“Under current policy settings, discounting residential negative gearing in isolation is a retrograde step for tax reform, in terms of both efficiency and equity. By adding to the existing high tax burden in the housing market, it would reduce Australian living standards. By reducing the supply of housing, it would erode housing affordability for both renters and owner-occupiers,” it found…
An Acil-Allen Consulting report prepared for the [Property] council found it was very difficult to know the impact of winding back capital gains tax discounts and negative gearing but also suggested prices could rise.
“Removing negative gearing or the CGT discount altogether for property will dampen investment, diminish rental supply and make it more likely that in the short to medium-term rents and property prices will increase,” the report said.
C’mon boys. If you are going to run a scare campaign against reform, at least get your stories straight.
Perhaps the most salient comments about Turnbott’s position comes from The Guardian’s Greg Jericho, who noted the following yesterday:
Gone is any sense of a rational adult debate of ideas. It took the prime minister less than a week to flick the hyperbole switch and declare the ALP plan will be virtual Armageddon for the housing market…
Clearly the government has done the maths and decided that as 66% of households either have a mortgage or own their house outright, that it is far better to scare them than try to appeal to the smaller numbers of prospective home owners.
Turnbull’s belief that removing negative gearing will “smash the residential housing market” is one echoed with glee by the treasurer, Scott Morrision…
It’s a pretty silly argument that doesn’t hold up under close examination. Even worse, it also suggests a pretty dismal assessment of the state of Australia’s housing market.Are we to assume that the prime minister and the treasurer believe the value of Australian homes is reliant only on the ability of investors to use the system to avoid paying tax?
If so, that’s a pretty scary thought. It suggests that not only do the two top people in our government think the Australian housing market is some sort of tax-driven Ponzi scheme, but that they also want to make sure it stays that way.
Couldn’t have said it better myself.
The Turnbott Government is no longer managing an economy, but rather one giant housing bubble.
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